China taps appetite for credit with first US-dollar bonds since 2004

US$2 billion offering expected this month

China is set to issue its first dollar-denominated bonds in more than a decade, a move announced in June by the Ministry of Finance, shortly after Moody’s downgraded China’s sovereign rating from A1 to Aa3. The Wall Street Journal reports that the US$2 billion offering will come this month, citing bankers in Hong Kong.

The small-scale issuance is largely symbolic by itself, but is potentially significant if followed up by more deals, writes the Financial Times:

Strategists said that the bond sale would be significant if it were the first in a series of dollar deals of differing maturities that aimed to give Chinese companies a yardstick from which to value their own deals.

“China should have done this a while ago — that is, build a yield curve in dollars for companies to price off,” said Owen Gallimore, credit strategist at ANZ.

Bloomberg is more excited about the offering, saying the deal is set to “shake up market”:

Another potential effect of China’s issuance could be to spur other Asian countries to come to the dollar market, analysts said. Hu at Invesco said investment-grade companies in Malaysia, South Korea and Thailand, as well as their governments, could be encouraged if China secures beneficial pricing.